UPS profit in second quarter off 4%

Tuesday, July 23, 2013

UPS said it had a profit of $1.07 billion in the second quarter, 4 percent less than the $1.12 billion earned in the same 2012 period. Revenue was $13.51 billion in the second quarter, 1.2 percent higher than the $13.35 billion recorded in the same 2012 period.
International package volume was up 5 percent, and domestic package volume was up 1.2 percent.
“Market conditions and shipper preferences clearly impacted our freight forwarding and International business,” Scott Davis, chairman and CEO of UPS, said in a statement. “UPS is adapting to these conditions to ensure we deliver a solid second half.”
The company gave this summary of its three major business areas:

U.S. domestic operating profit in the second quarter of 2013 was $1.13 billion, down 0.2 percent compared to the same 2012 period. Revenue was up 2.3 percent to $8.24 billion. The operating margin was down slightly due to changes in customer and product mix along with higher pension costs. It said daily package volume improved 1.9 percent compared to the same period last year, driven by residential shipments from e-commerce customers. Contraction in letter volume led to the 1.5-percent decline in its Next Day Air product. The company said volume growth was delayed by ongoing labor negotiations. On June 25th, UPS received majority approval from the Teamsters on the National Master Agreement. It said for the local supplements that remain open, and UPS Freight, the company and the Teamsters have agreed to contract extensions.

International package operating profit was $451 million, down 0.7 percent, while revenue increased 1.6 percent to $3.06 billion. UPS said "customers continue to trade down to slower moving solutions resulting in a 3.4-percent decline in export revenue per piece, on a currency neutral basis." It said lower fuel surcharges and customer mix also pressured yields.

Supply Chain & Freight operating profit was $159 million in the second quarter, 21.3 percent lower than in the same 2012 period. Revenue in the segment was $2.2 billion, down 3.2 percent. The company said forwarding results remained under pressure as tonnage declined and yields were negatively impacted by lower demand in trans-Pacific trade lanes. It said UPS freight revenue improved, but operating profit and margin declined slightly, due to increases in compensation and benefit expense. It said distribution revenue was up in the mid-single digits, and the company said growth from healthcare customers was offset by declines in high-tech. It noted that during the quarter it opened new dedicated healthcare distribution facilities in Louisville and Hangzhou, China. - Chris Dupin